OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NAMAYINGO TOWN COUNCIL NAMAYINGO DISTRICT FOR THE YEAR ENDED 30 TH JUNE 2016
TABLE OF CONTENTS LIST OF ACRONYMS... 2 1.0 INTRODUCTION... 5 2.0 AUDIT OBJECTIVES... 5 3.0 AUDIT METHODOLOGY... 6 4.0 ENTITY FINANCING... 7 5.1 Categorization of findings... 7 5.2 Summary of audit findings... 7 6.0 Detailed Audit Findings... 8 6.1 Under-collection of local revenue... 8 1
LIST OF ACRONYMS Acronym Meaning UGX RT. HON. ISA LGFAR Ft PPDA LGFAM Uganda Shillings Right Honourable International Standards on Auditing Local Government Financial and Accounting Regulations Feet Public Procurement and Disposal of Public Assets Local Governments Financial and Accounting Manual 2
REPORT AND OPINION OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NAMAYINGO TOWN COUNCIL FOR THE YEAR ENDED 30 TH JUNE 2016 THE RT. HON. SPEAKER OF PARLIAMENT Introduction I have audited the accompanying financial statements of Namayingo Town Council, Namayingo District for the year ended 30 th June, 2016. These financial statements comprise of the statement of financial position as at 30 th June, 2016, statement of financial performance, statement of changes in Equity, cash flow statement together with other accompanying statements, notes and accounting policies. Management s Responsibility for the Financial Statements Under Article 164 of the constitution of the Republic of Uganda, 1995, (as amended) and section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Namayingo Town Council. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments Financial and Accountability Manual, 2007, and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended) Section 87 of the Local Governments Act and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these financial statements based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA). Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatements of the financial statements whether due to fraud or error. In making those risk assessments, the auditor considers 3
internal controls relevant to the entity s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my unqualified audit opinion. Part A of this report sets out my opinion on the financial statements. Part B which forms an integral part of this report presents in detail, all the significant audit findings made during the audit which have been brought to the attention of management PART A Unqualified Opinion In my opinion, the financial statements of Namayingo Town Council as at 30 th June, 2016 are prepared, in all material respects, in accordance with the Local Governments Financial and Accounting Manual, 2007, Section 51(3) of the Public Finance Management Act, 2015, the Local Governments Financial and Accounting Regulations, 2007 and the Local Governments Act cap 243 (as amended), of the Laws of Uganda. John F. S. Muwanga AUDITOR GENERAL 21 st November, 2016 4
NAMAYINGO TOWN COUNCIL DETAILED REPORT OF THE AUDITOR GENERAL FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2016 1.0 INTRODUCTION In accordance with Article 163(3), of the Constitution of the Republic of Uganda 1995, I am required to audit and report on the public accounts of Uganda and of, all public offices including the courts, the central and the Local Governments administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Namayingo Town Council to enable me report to Parliament. 2.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:- a. To verify whether the financial statements have been prepared in accordance with the requirements of the Local Governments Financial and Accounting Manual 2007 and the Local Governments Financial and Accounting Regulations 2007; and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. To verify whether all the funds of the entity were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed have been procured in accordance with the PPDA Act. d. To evaluate and obtain sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses. e. To verify whether the management of the funds of the entity was in compliance with the Government of Uganda financial regulations. 5
f. To verify whether all the necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented. 3.0 AUDIT METHODOLOGY The following audit procedures were undertaken:- a. Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements of the entity. b. Expenditure The payment vouchers of the entity were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period. d. Procurement Reviewed the procurement of goods and services under the various departments during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the assets of the entity during the period under review f. Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluated the overall financial statement presentation. 6
4.0 ENTITY FINANCING Namayingo Town Council is financed by grants (Conditional and Unconditional) from Central Government, donations and locally generated revenues from taxes, fees, licenses and charges. During the year, the Town received grants totaling to UGX.552,445,423, from Central Government and UGX.46,832,300 from locally generated revenues all totaling to UGX.599,277,723 which constitutes 67% of its approved budget estimates of UGX.882,544,000. 5.0 FINDINGS 5.1 Categorization of findings The following system of profiling of the audit findings has been adopted to better prioritize the implementation of audit recommendations: Category Description 1. High significance Has a significant/material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2. Moderate significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3. Low significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest. 5.2 Summary of audit findings No. Findings Significance 6.1 Lack of land titles High 6.2 Under-collection of local revenue Moderate 7
6.0 Detailed Audit Findings This section outlines the detailed audit findings, management responses thereof and my recommendations. 6.1 Under-collection of local revenue Regulation 32 of the LGFAR 2007 requires Councils to ensure collection of all budgeted revenue in an approved manner and the revenue banked intact in council accounts. However, a review of the revenue performance of the Town Council revealed that out of the budgeted sum of UGX.71,401,355 for local revenue, only UGX.46,832,300 was collected, resulting into a shortfall of UGX.24,569,055, representing 34.4%. Management indicated that action had been taken to recover these funds through courts of law. The non-collection of budgeted revenue affected the capability of the Town Council to implement all the work plans thus affecting service delivery. I urged the Accounting Officer to follow up recovery. 6.2 Lack of land titles Regulation 88 of the Local Governments Financial and Accounting Regulations, 2007 requires the Heads of Departments to maintain registers of land and buildings owned,rented or occupied by their departments, and where title deeds exist such shall be kept under safe by the Head of Finance and to be inspected by the Auditor General annually. It was observed that the Town Council did not have land titles for the land where its Council Head Office is located, land for garbage disposal and the market. I advised the Accounting Officer to liaise with Ministry of Lands, Housing and Urban Development and District Land Board to ensure that the land titles are secured. 8